The rapid spread of COVID-19, or the coronavirus as it is commonly known, has heightened economic fears and anxiety around the world.
On Thursday March 12, US stock markets saw their biggest single day losses since Black Monday in 1987 and three days later the Federal Reserve announced that it would be cutting its benchmark interest rate to effectively zero and restarting its Quantitative Easing program. With businesses and whole cities shut down for the foreseeable future, a full-blown financial crisis is not out of the question and many analysts now see a recession later this year as an inevitability.
As was the case during the last major financial crisis 12 years ago, the Trump administration appears to be considering and readying a wide range of government interventions to prop up collapsing markets and failing industries. For instance, with eerie echoes of George W. Bush’s failed 2008 economic stimulus package (which included a tax rebate), President Trump initially suggested an stimulus package that includes a payroll tax break. Subsequently, an economic relief bill was negotiated between the Congress and the White House that includes unemployment insurance and virus testing, among other measures. Direct public bailouts for airlines, oil companies, banks, and other corporations hardest hit by COVID-19 appear to be all but certain if economic conditions continue to deteriorate. Already, many observers are expecting the administration to move quickly to bail out heavily indebted shale companies imperiled by the drop in oil prices.
